For years, PC manufacturers have balanced the cost of memory against other components like processors, displays, and chassis. But a dramatic shift is underway: at HP, the cost of RAM and storage now represents 35% of the total bill of materials for its PCs—a figure that has doubled in just 12 months.
This reversal reflects a broader industry upheaval. While memory costs typically hovered around 15–18% of production expenses as recently as last quarter, the surge in AI-driven demand has sent prices spiraling upward. The result? HP’s supply chain teams are scrambling to adapt, even as the company reports strong revenue growth in its personal systems division—$10.3 billion in the latest quarter, up 11% year-over-year.
Many assumed that HP, with its scale and long-standing supplier relationships, might weather the memory crunch better than smaller players. But the company’s financial leadership acknowledged during its latest earnings call that the supply-side crunch is no longer a temporary blip—it’s a structural challenge. To counter it, HP has secured long-term agreements with memory suppliers for fiscal 2026, qualified new vendors, and slashed the time needed to onboard new materials by half. Yet even these measures may not fully offset the 35% memory cost now baked into its PC production.
Is this just a temporary spike?
Unlikely. While some consumers may have rushed to buy PCs before prices climbed further, industry analysts warn that relief is still years away. New memory production capacity—critical to easing the crunch—won’t meaningfully reduce prices until 2028 at the earliest. In the meantime, HP’s executives are bracing for a more cautious outlook, with performance expected to skew toward the lower end of its guidance range.
Despite the headwinds, HP’s AI-focused PCs are performing well. The company reports that 35% of its PC shipments in the latest quarter were AI-enabled models—up from 30% in the prior quarter and 25% the quarter before. Demand for these devices, driven by both consumer and enterprise adoption, is helping offset some of the memory cost pressures. Yet the paradox remains: the same AI boom fueling PC sales is also the primary driver behind the memory price explosion.
For now, HP’s strategy centers on supply chain agility—diversifying vendors, stockpiling critical components, and accelerating product configuration changes. But the question looms: can even a tech giant like HP sustain profitability when a single component now consumes a third of its production budget?
